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1、Reported EPS$0.47Deferred Maintenance 0.02Heavy MaintenanceSprings Relocations 0.03Other Overseas Dividends 0.10Restructuring ReversalAdjusted EPS （earnings management）$0.63Table- 2Accounting issuesEffects on preliminary EPSProposed solutions under earnings managementDeferred Maintenance+$0.02Capita

2、lize and defer the cost to subsequent periodCapitalize and defer the cost to subsequent period if the maintenance service improve the quality of serviceSprings Relocation+$0.03Brazilian DividendsRecorded as other income+$0.10Recorded as other income if they can be reasonable estimatedItalian Subsidi

3、ary Write-DownRecorded as cost of goods sold if the amounts are insignificant; recorded at operating costs if the amounts are insignificantItalian SubsidiarLawsuitDisclosed in the footnotes Major Ads CampaignExpensed the cost in the current periodForeign Exchange GainRecorded as other comprehensive

4、incomeRecord the reversal as liability account,charge the restructuring costs against the reversal and add the remaining reversal account into net incomeTable -2 ddiscretion to use accruals choose among different accounting methods to recognize revenues,record depreciation exepense, defer tax paymen

5、ts , firms have discretion in choosing accounting principle s and must make estimated in applying those accounting principles in most cases. Firms should disclose sufficient information in the financial statements and notes to inform users of these choices. Measuring the economic effects of a firm a

6、ctivity often requires judgement, estimation and subjectivity. The increase in the degree of subjectivity also increases the potential for firms to report accounting information that include unintentional measurement error or intentional bias to portray the firm in a light most favorable to the firm

7、 or its manager.the reason why is largely affected by division managers personal intergrity.trying to create a favorable picture of their departments growth and maximize their own compensation, the managers are induced to aggressively abuse accounting rules s and encourage questionable earning manag

8、ement practices.To create optimal manager compensation payments, manipulate their compensationTo influence short term stock price performance to meet the security analyst s profit forecast which will enhance the success in the acquisition negotiations. 1.Restructuring reserveFirm record a restructur

9、ing liability on the balance sheet and the associated restructuring as an expense on the income statement when firms have committed to the restructuring plan and the restructuring costs meet the definition of liability. Earnings management permits firms to remain the reserve in the accounts and abso

10、rb losses as they occur. Stamford charges actual losses against the reserve account, instead of against net income. When the contingency is solved, the remaining amount in the reserve account will be reserved and added into net income.2.Foreign exchange gainShould be included as owners equity as par

11、t of other comprehensive income and included as earnings only when firms receive cash from foreign units and covert foreign currency into US dollars. however, earning management create opportunities for firms to realize gains and reported as income by selling the securities at a gain3. Deferred main

12、tenanceMaintainance and repair costs should be expensed immediately as incurred. Earning management provides the opportunity for managers to classify maintenance costs as capital expenditures, therefore 4. Heavy maintenanceClassify as capital expenditures and defer extra costs to later period.5. maj

13、or advertising campaign GAAP requires immediate expensing of these costs as incurred in the first quarter. Reported as part of SG&A expense on the income statement 6. Brazilian dividends Dividend income is reported as earnings on the income statement when received or deem to be receivable.7.other ov

14、erseas dividendsReported as earnings on the income statement8.Italian subsidiary write- downReduce the asset account of inventory, report the write down of inventory as an expense account or cost of goods sold account in the income statement.Management judgment in the subsequent expenditures area cr

15、eates amply opportunities for earnings management. The capitalizing vs the expense choice has immediate effect s on the income statement. One way to increase earnings is to classify routine maintenance and repair costs as capital expenditures. thus, investors must rely on managements integrity and a

16、uditors monitoring as protection against self interested managers manipulations earnings through biased application of the judgment necessary in many settings. strong governance and auditor reporting of internal reporting weakness assist the accounting quality.A portion of an estimated annual expend

17、iture that might be expensed for the entire annual period may be accrued or deferred at the end of the interim period as management allocates the estimated annual expense between periods on the basis that reflects time , sales volumn, or production activity.Im having a tough time adjusting to colleg

18、e. I miss my family, my friends and my home. You are just having a bout of homesick, it is normal.Really? But I dont think everyone else is feeling the same way.They just wouldnt admit it. Being homesick is part of almost everyones college experience.Maybe u r right.ive never been away from home for

19、 so long. I miss the way my dog would greet me every day after school.I know u r missing the comforts of your familiar routine. But u need to start ur own life now. Ive trying very hard to deal with these feelings. But all of my efforts have been futile.Well, dont be too harsh on urself for experien

20、cing something that is completely normal. Anyway, do u have any idea on how I should get out of this funk?It might help to start by thinking about what in particular you are missing. I found a mice restaurant that has ur hometowns local specialty. Would u like to go sometime? Its only five minutes w

21、alk away from school.Ive been missing the smells of home cooking ever since I came here. I was even thinking if I should ask my mom to send me a package of home made waffles.Perhaps u can find some dished that approximate what u r missing. Lets try the restraurant first.I wont miss it for world.But now, I feel overwhelmed by the current workload. I have so many exams, reading lists and other responsibilities.The shiny newness of colleage has disappear by now. I no long enjoy my privacy because I have roommate. I hate the idea of ha